Could you benefit from releasing cash from your home?

Nationwide recently reported that average UK house prices are at a record high and forecast to increase further in 2017. The average house is now worth £218,000¹ which is an awful lot of money to have tied up in a property – especially if you are living on a limited income – which begs the question of whether it's worth turning some of that property equity into cash.

For many people, their home is probably their biggest financial asset, far outweighing any savings and income, so using this asset to access a lump sum may be tempting.

If you are looking to release cash from your home, you have a few options. You can downsize – assuming you can release enough cash to cover the cost of selling and buying and leave you with enough left over.

Other options you could look at include other forms of secured loans, taking in a lodger, or you could consider equity release.

Equity release allows homeowners who are aged 55 or over to release some of the equity tied up in their home and turn it into tax-free cash.

Click here to find out how much cash you could unlock

How it works

The most common type of equity release is a lifetime mortgage – which enables you to borrow a lump sum against your property. During the course of the loan, interest will build up and be added to the outstanding loan. You are not required to make any regular monthly repayments as the amount that you have released, plus any interest, is repaid from the money made when the property is sold. Generally this is when die, move into long-term care or permanently leave the property.

Age Partnership says that at the moment record low interest rates are creating an opportunity to offer competitive deals. Current low lifetime mortgage interest rates could save homeowners who had previously considered equity release, hundreds or thousands of pounds of interest over the course of the plan, compared to what they would have paid.

Click here to find out how much cash you could unlock

Rising prices

The company also highlights recent Nationwide figures that show UK average house prices have increased by 26% since 2012² - which means you could unlock more tax-free money from your home than you could previously.

If you have already unlocked the money from your home, you may be tied in with fees and early repayment charges, but it's still worth investigating whether you could be better off switching plans – which may enable you to borrow more or switch to a lower interest rate or a more flexible plan.

What's more, Age Partnership points out that The Centre for Economics and Business Research, predicts average house prices may rise significantly over the next five years, so those people with a lifetime mortgage, where you continue to own your property, could still benefit from price rises.

Of course, there are no guarantees that price rises will outweigh the additional interest payable on your loan, which is why it's important to think this through carefully.

Getting the best advice

Those who are considering releasing the cash locked up in their home should seek independent, impartial advice from someone like Age Partnership who will talk you through all the considerations - including what impact it could have on the size of your estate over time and if your entitlement to means-tested benefits could be affected.

They will charge a fee based on the figure released from the property, but in return will also compare the whole of the market and only recommend a plan if it's in your best interests. To find out more about equity release including how much money you could release from your home, Click here

Equity release may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.

Plan availability is subject to lenders criteria. Age Partnership will provide advice for free and without obligation. Only if you choose to proceed and your case completes would a typical fee of 1.95% of the amount released be payable.

¹Halifax, December 2016. ²Nationwide,September 2012 to September 2016.